For a man who has presided over the first major bank run in 150 years and the worst single year for growth since 1921, Alistair Darling was last night sounding surprisingly upbeat on the eve of his third budget.

In 2008, the package was overshadowed by the enforced nationalisation of Northern Rock. Last year, the economy was in the throes of a downturn that cut output by 2.5% in a single quarter. This year, the chancellor will tell the nation that while Britain is not out of the woods, the worst is over.

"I'm confident about the future," he said in a Treasury podcast. "I think government can make a real difference, it can't do it all itself, it needs people, it needs imagination, it needs flair – but government can make a difference to the future of our country for the next 10 or 20 years."

The theme of what will inevitably be a deeply political occasion will be Labour's plans to develop a better-balanced economy out of the debris left by the financial crisis of the past three years. There will be a new £2bn green infrastructure fund, a capital growth fund to ease the credit crunch for small and medium-sized enterprises (SMEs), new lending targets for the high street banks in which the state has an equity stake, and a target for 15% of all government business to go to SMEs.

Darling does not have the strongest hand to play, a point David Cameron will seek to exploit in his response to the budget speech. For the Conservatives, it is a bit rich for Darling to ask for a Labour mandate to rebuild the economy when he has presided over the biggest bust of the postwar era. Britain, the opposition believes, is close to being the next Greece.

The precarious state of the public finances means that the City will be a key audience today. The budget deficit, while likely to be some £10bn lower this year than the £178bn projected in December's pre-budget report, will still be a peacetime record. Without a credible plan for slashing borrowing in the next parliament, there is a risk that Labour's slim prospects of winning a fourth term in office will be scuppered by a run on sterling.

Even so, the chancellor believes he can sketch out the differences between his approach and that of his Conservative shadow, George Osborne. Darling's message will be that government intervention has helped to limit the increases in unemployment, home repossessions and business failures, and that now is not the time to jeopardise the fragile recovery by raising taxes or cutting spending. He will accuse the Conservatives of being on the wrong side of the argument throughout the crisis, opposing the £20bn stimulus in late 2008 and being over-zealous now with deficit reduction plans.

At the same time, Darling will stress his unwavering determination to restore the public finances to health. He is expected to give examples of where Whitehall departments will be forced to trim spending, to achieve the government's target of halving the deficit over the next four years. But the focus will be on "efficiency savings," – streamlining back office functions such as finance and human resources, cutting bureaucracy, moving to cheaper premises – which the Treasury claims can be made without endangering frontline services.

Darling has two things in his favour. The first is that he correctly predicted the economy would return to growth at the back end of 2009, bringing to an end six successive quarters of falling GDP – the longest period of decline since modern records began in 1955. The second is that lower than expected unemployment, higher oil prices, the pick up in the stock market and the return of VAT to 17.5% at the turn of the year has made the public finances look slightly less awful. While the Treasury will bank most of the £10bn it will get from the smaller deficit, the City still believes there will be room for some limited giveaways of perhaps £2-3bn.

High on the list is petrol duty, due to increase by 1p on 1 April: with oil prices rising, Labour may be reluctant to fight an election with fuel at £1.20 a litre. Schools, health and international development, all causes close to the hearts of Labour's core voters, could also receive a modest boost today. What there won't be is a showstopping cut in income tax that chancellors with an imminent date with the electorate like to produce. Darling insists he is not that kind of chancellor.